The Chrysler bondholders’ enviable deal

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Scott Sperling has some home truths for Chrysler bondholders whining about how they’re being treated unfairly:

The plan demands that Chrysler’s current and future retirees take equity in lieu of guaranteed benefits. Fiat must agree to take only stock in payment for billions of dollars worth of needed technology. And the unions must accept lower wages alongside significant plant closures and job losses. These policies inflict pain across the board. Unfortunately, this situation requires it.

Interestingly, only the debtholders are being given the opportunity to take significant cash out of Chrysler. For all the other stakeholders, any return depends upon the difficult work and investment necessary for long-term success. This is hard, but this is capitalism.

I like this way of looking at things: if the bondholders would really rather have equity than cash, I’m sure they can come to some deal with the UAW, or even with the US government, to do a swap — basically buying a stake in the post-bankruptcy carmaker. But they won’t, because they don’t really want equity at all — they just want more cash, despite the fact that nobody else is getting any cash at all.